The Downside of Dairy

The Downside of Dairy. I’m Greg Martin with today’s Line On Agriculture.

The dairy industry is struggling. Everyday we hear more and more about the tough times that have hit the nation’s diaries. It is a game of supply and demand and according to David Darr, vice president of sustainability and public affairs with Dairy Farmers of America it is now a game of catch up.

DARR: I use the analogy with people of two kids playing and one stops and the other one runs over the other, and unfortunately that’s what it’s kind of like in the dairy industry right now where demand has really stopped and our milk supply has really just blown right passed it. But we’ll get in better balance but unfortunately it’s going to take a few months for us to get there.

If you have been in the grocery store lately and bought a gallon of milk or a pound of cheese you would be hard pressed to realize that the dairy industry is not making any money.

DARR: The situation is really tough in the dairy industry right now. We really are facing a situation where milk prices are at the lowest levels they’ve been at since 2003 and while we’re used to cycles in our business and in our industry, the unique thing about this cycle that’s impacting producers more than ever is the fact that input costs still remain very high.

There is talk that we will see some of the feed costs come down Darr says those costs are still the major cause of the industry downturn.

DARR: While we’ve seen corn and other feed components come down from their peaks in the middle of 2008, they’re still at levels that when you compare them with the milk prices we face are 50% more than where they were at 3 or 4 years ago.

And Darr says that those decreased feed prices are a good thing but the bottom line is we need to get more milk sold into the worldwide market.

DARR: We really need to see a demand impact both here in the United States and around the world to help us clear some inventories and bring demand back more in balance with the supply. As we look around the world at some of the factors causing the recession in the dairy industry right now, it literally is global where we have seen a dramatic decline in exports of U.S. dairy products and for every pound we were exporting and aren’t today – that ends up in inventories in the United States and has really caused the downward pressure on milk prices.

Tomorrow we will talk with DFA’s David Darr about the export market.

That’s today’s Line On Agriculture. I’m Greg Martin on the Northwest Ag Information Network.